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Socially optimal liability rules for firms with natural monopoly in contestable markets

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  • Tsuneki, Atsushi

Abstract

This article considers the problem of socially efficient liability rules for firms in contestable markets where natural monopoly prevails due to decreasing average cost. If the fixed cost that pushes the entry-limiting price above marginal cost is large relative to the level of external harm of firms, the negligence regime is socially superior to the strict liability regime. In the opposite case, the strict liability rule may be socially superior.

Suggested Citation

  • Tsuneki, Atsushi, 2011. "Socially optimal liability rules for firms with natural monopoly in contestable markets," International Review of Law and Economics, Elsevier, vol. 31(2), pages 99-102, June.
    • Handle: RePEc:eee:irlaec:v:31:y:2011:i:2:p:99-102
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    References listed on IDEAS

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    1. A. Mitchell Polinsky & William P. Rogerson, 1983. "Products Liability, Consumer Misperceptions, and Market Power," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 581-589, Autumn.
    2. Polinsky, A Mitchell, 1980. "Strict Liability vs. Negligence in a Market Setting," American Economic Review, American Economic Association, vol. 70(2), pages 363-367, May.
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    Cited by:

    1. Sungho Yun, 2018. "Minimum safety standards with asymmetric safety costs," Journal of Regulatory Economics, Springer, vol. 53(2), pages 152-173, April.

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